The Canadian-EU trade agreement which could act as a Trojan horse for TTIP
These are crucial days for TTIP. The US-EU trade deal, which would legally enforce the privatisation of the NHS, is facing extraordinary levels of public protest on both sides of the Atlantic. But while opponents focus on the battle at hand, a separate Canadian trade deal could allow TTIP's worst abuses by the backdoor.
Political leaders are increasingly wary. What they thought could be wrapped up behind closed doors is now the subject of intense public anger. David Cameron says he wants to put "rocket boosters" under it and patronisingly suggests those protesting against it do not understand it.
Of course, it would be difficult for people to come to safe conclusions because the talks are held in private. Much fanfare was made of a room where the secret documents involved could be viewed by politicians, but very few MEPS are allowed in.
The European Court of Justice refused to register an official 'Citizens Initiative' over the deal, thereby rejecting the one solitary strand of democratic accountability which could have been applied to the process. That is now the subject of a legal challenge.
A petition against the deal clocked up close to a million signatures in less than a month. Moved by the increasingly intense public opposition – particularly in Germany – Jean-Claude Juncker has deprived his trade commissioner of control over the investor-protection clause. Funnily enough, it's the man Cameron decries as an affront to democracy who stands up to a treaty which would hand corporations power over national governments.
David Cameron gets into a car after leaving a European Union summit at the EU headquarters in Brussels.
Because no matter the platitudes of its supporters, there is a very good reason the deal is held in secret: the public would not accept this level of submission to corporate interests. The investor state dispute settlement in the treaty allows private companies to sue nation states at private international tribunals over laws which threaten their profits. It's particularly popular when challenging consumer health protections, environmental regulation and reform of the financial services industry. The legal mechanism is not available to domestic investors or to ordinary people. They are decided by for-profit arbitrators who unsurprisingly tend to interpret the law in favour of investors.
The danger for something like the NHS is that the private firms already invited in by the coalition will be almost impossible to get out, because they will be able to sue the state for loss of expected revenue. The NHS will additionally be put at the mercy of aggressive US healthcare firms.
The public outcry is now so severe that TTIP could be stopped, or more likely its investor state dispute settlement will be jettisoned in order to get the rest of it through.
But there is another EU trade treaty, this time with Canada, which has been mostly ignored. And it could act as a Trojan horse for TTIP.
A report today by Pia Eberhardt, Blair Redlin and Cecile Toubeau warns that the deal, called Ceta, could allow US firms to launch investor state actions against European governments using subsidiaries in Canada.
It's not unrealistic. US corporations dominate the Canadian economy. Over half the annual foreign investment into Canada is from the US. Since 1985, 76% of foreign investments were for the acquisition of existing Canadian companies, rather than investment in new businesses.
US investors are the most aggressive when it comes to investor state disputes. They’ve filed 22% of them this year. Statistically, investor arbitrators are more likely to adopt investor-friendly positions when the claimant is from the US. That's telling, given that 15 of the top 20 firms representing claimants and defendants in investor state disputes are headquartered in the US.
Mark Carney, the Canadian governor of the Bank of England. He spent 13 years with US firm Goldman Sachs before joining the Canadian Department of Finance.
There are limited opportunities for investor state cases under existing EU laws, mostly through bilateral treaties. And it is present in the energy charter treaty, which bent over backward to protect investment. But that is like a drop in the ocean compared to what will happen if TTIP is passed. The fear is that even if TTIP is stopped, Ceta will make its worst excesses possible through the backdoor.
Take Phillip Morris. The tobacco firm has made it very clear it will fight in any way it can to prevent plain packs for cigarettes. It seems highly likely they would investigate the use of subsidiary firms in Canada to launch a dispute with EU governments if Ceta is passed. Or vice versa, if Canada passes it first.
The real danger of these legal actions is not the results themselves – although for some countries, particularly in the developing world, the financial penalties imposed can prove an existential threat. The real danger comes from the chilling effect. These cases push governments away from ever challenging the might of the corporate sector.
Take Indonesia. Like many other developing countries, it wants to be less dependent on the export of raw materials and to drive proceeds from those resources towards local and national development. It tried to implement a ban on unprocessed mineral exports, forcing companies to refine and process minerals, for instance by establishing a smelter, in the country before they were sent abroad. That way you can increase spending at home, create industry, train workers and start to take greater control of your economic destiny.
Plain packs could trigger investor state disputes from tobacco firms
In July this year, Newport Mining Corporation said the move violated an investment agreement between Indonesia and the Netherlands. After a month, it withdrew the case, but only after being given a special exemption from the new law.
The trouble with the freezing effect is that it's very hard to demonstrate, by virtue of being something which is notable by its absence. But the Indonesia case shows how it works. It shows how democratic institutions are made submissive in the face of corporate might.
Investors can't just sue on contracts which have already been signed. They may also be able to sue on the basis of future profits which could have accrued through unrelated government activity. That type of bizarre, excessive power seems a likely outcome from a treaty which provides a very wide interpretation of the 'fair and equitable treatment' clause. It includes the protection of investors' "legitimate expectations" and the "right" to a stable regulatory environment.
The expectation among analysts is that Canadian oil and mining firms will use the investor state dispute system in the regulation of natural resources, while European banks, insurers and holding companies will use it to challenge any reform of financial services.
When you take a close look at these trade treaties they actually become more worrying, not less. Cameron is quite wrong to pretend there is nothing to worry about. Quite the opposite. TTIP and Ceta both threaten to fundamentally skew the relationship between corporations and democratic government. Those fighting TTIP must make sure Ceta is part of the debate, or the worst excesses of the US trade deal could creep in through the Canadian one.